Apple shares took a 3% dip Tuesday amid about a cut in production of the trendy iPod-inspired phone. The chatter that sent the stock down was that Apple was reducing its production of iPhones "9 million units to 4.5 million units," according to a note from Miller Tabak & Co.

The note cites talk among traders at Goldman Sachs and also includes speculation that the cuts may be coming in iPod production.

You guys are all fools. That's why on the street there is something called "smart money" you're obviously not a part of it.

"There is unconfirmed chatter that iPod production is reduced. That is why the option volatility in Apple is elevated suggesting this uncertainty," said Paul Foster, options strategist at Web information site theflyonthewall.com.

Apple's August option implied volatility -- which measures as a percentage how much the stock will move up or down over a rolling 12-month period -- stood at 43 percent early on Tuesday, above its 26-week average of 37 percent, according to market research firm Track Data.

"There are occasional rumors on Apple, often unconfirmed. A lot of them end up being wrong or short-term," said Shaw Wu, an analyst with American Technology Research.

He noted that Apple confirmed last week it expected to sell more than 700,000 iPhones in its current quarter and 10 million next year.

"As I understand it, iPhone production actually has been going up, since they obviously are going to ship a lot more than what they did in the first two days," Wu said.

Apple stock was down $5.02, or 3.6 percent, at $136.41 in late afternoon trading on Nasdaq after falling as low as $134.18 in the session.

Since Apple announced the iPhone in early January, the stock has risen nearly 60 percent.